Fintechs helped Black-owned small businesses get access to PPP loans during the pandemic more than banks did. It's weird.
Marvin Owens, former senior director of economic programs for the NAACP and chief engagement officer at Impact Shares, told Insider that being denied access to credit means Black business owners"aren't given the ability and capacity to grow their businesses and to expand their operations and to be able to take advantage of new markets and new opportunities. That contributes significantly to the Black-white wealth gap.
The researchers who looked at fintech-enabled PPP loans found that the top four banks — JPMorgan Chase, Bank of America, Wells Fargo, and Citibank —"exhibited little to no disparity after including controls," possibly also due to higher levels of automation at those banks than at smaller institutions.
"We find that the tendency of Black-owned businesses to borrow from fintech lenders instead of smaller conventional lenders is consistently higher in areas with more racial animus, even after controlling for firm and loan characteristics," the authors wrote."These results suggest that preference-based discrimination might explain at least some of the substitution of Black-owned businesses towards fintech and away from smaller banks.
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